Steep financial crisis imperils tea industry in Kerala

It is strange paradox that even while Kerala Chief Minister E. K. Nayanar and his entourage make valiant forays into industrial strongholds in Bombay, desperately wooing unwilling business tycoons to strike-ravaged Kerala, the existing indigenous industries are fleeing their traditional home-base en masse.

Coir, cashew, beedi, tile, rubber products and furniture are cases in point. A recent entrant at the end of this long line of defectors is tea. The opening of the country's seventh auction centre at Coimbatore, is a direct retaliation to the chaotic labour situation in Cochin. It amounts to a "shifting", in stages, of the venue from Cochin, the second biggest tea auction centre, though tea trade circles would not like to admit this fact.

Malaise: But the shifting of the auction is only the tip of the iceberg, and a small part of the Kerala tea bungle. Though the state accounts for just 10 per cent of the country's acreage under tea, it traces its roots back no fewer than 127 years.

Now, says Jemes Mackil, secretary of the Association of planters of Kerala: "We would have migrated if we could." More explicit was an appraisal by the United Planters Association of South India (UPASI) which said of Kerala tea, "Had it not been for the land-based nature of the tea industry and the perishable nature of the green leaf which has to be necessarily processed in the region in which it is grown, the possibility of a movement of the tea industry away from Kerala could not have been overruled."

The reason for the despondency is not hard to seek. Tea provides round-the-year employment to one lakh workers and provides Rs 20 crore annually as taxes and duties to the exchequer. It accounts for one-fifth of all merchandise sent out of Kerala. Yet, a steep financial crisis has imperilled the industry.

At the root of this are cost increases which have made Kerala tea uncompetitive. Workers were awarded a 25 per cent wage hike in April 1980. This was implemented in November, adding Rs 1.50 per Kilo to the cost of production.

Rising Costs: One of the most sophisticated agricultural enterprises, tea consumes colossal amounts of fertilisers and the price increase effected on fertilisers in June 1980 resulted in a cost escalation of 60 paise per kg. Besides, plantations are afflicted by a fuel famine. Firewood is scarce and the industry switched over to furnace oil, but it proved uneconomical, working out to Rs 1.28 per kg of tea.

It then fell back on coal, but with the shortage of railway wagons, coal is brought by road, to raise its cost to Rs 600 per tonne as against Rs 250 by rail. The cost of tea production rose by 61 paise per kg. Other cost increases are for packing material - tea chests now come from distant Calcutta because of the scarcity of plywood in Kerala.

Aluminium foil, transport, pesticides and insecticides cost more now than before. All told, the overall cost of production increase is Rs 2.77 per kg, much higher than in any other tea producing state. To manufacture one kg of tea in Kerala, it now costs Rs 14.26 as against Rs 11.49 in 1979-80.

As a result, Kerala teas get the rough end of the stick in fiercely competitive world markets flooded with cheaper Kenyan and Chinese teas. The cost of production of one kg of Kenyan tea in 1980-81 is only Rs 8.21, almost half that in Kerala, USSR is the single largest buyer of Kerala teas, now that UK and USA have turned elsewhere for their tea requirements.

The Food and Agriculture Organisation (FAO) and the United Nations Council for Trade and Development (UNCTAD) foresee a drastic cut in worldwide demand for tea; this means a slump of the world tea economy and Kerala tea will inevitably be a loser.

Besides, Kerala teas do not quite capture the same richness of flavour because of the lower elevation where they are grown and maintain a low profile in price realisation - the average Cochin auction price being Rs 12.32 per kg as against the South Indian average of Rs 13.30 per kg.

To cap it, tea literally groans under a monumental burden of taxes, both Centre and State competing for the lion's share of revenues. Tea is one of the most heavily taxed commodities in Kerala, the rate works out to almost Rs 3 per kg. With just 1.2 per cent of the cropped area under tea cultivation, tea yields 50 per cent of the total revenues collected by Kerala from the agricultural sector.

Central Income Tax, Excise Duty and Cess are the Centre's impositions; not to be outdone, the State imposes Agricultural Income Tax, sales tax, plantation tax, and land tax apart from a number of local levies.

Remedy: Despite asphyxiating constraints, yields have increased considerably. There had been a near 5 per cent increase between 1975 and 1979. The Kerala tea yield averaged 1,611 kgs per hectare in 1979. This figure, though lower than its South Indian counterpart of 1,869 kgs per hectare was higher than the national average of 1,484 kgs.

What is more, over 75 per cent of the area is high-yielding and that fact alone should make it imperative that it be spared the financial crisis that threatens it. Improved cultural operations, rejuvenation, pruning, infilling, consolidation, replanting and extension are long-term measures and they need vast capital outlays.

But more urgently, the malevolent cloud that has descended on the industry with the dawn of the '80s has to be dispersed, with a generous dose of short-term remedial measures which only the state Government is empowered to initiate.

Some of the suggestions made by UPASI need to be considered - not lending support for payment of bonus in excess of what is statutorily due, a development-oriented fiscal policy, introduction of a crop diversification subsidy to enable conversion of uneconomic tea areas to other crops, an upward revision of the bank credit limits to ease the acute cash flow position, doing away with the disparity between the prices of fertiliser for tea and ryot crops and last, but not the least, the formation of a separate cell in the state Government or a consultative committee :o look into plantation affairs.

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